BofA, Citi shares fall on nationalization fear
Thursday February 19, 11:47 am ET
NEW YORK (Reuters) - Citigroup Inc (NYSE:C - News) shares fell to 17-year lows on Thursday, with Bank of America Corp (NYSE:BAC - News) stock also plunging, amid renewed fears that growing losses could lead to government control of troubled U.S. banks, wiping out shareholders.
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Bank of America shares were down 10.7 percent to $4.07 in morning trading on the New York Stock Exchange, while Citigroup stock fell 10 percent to $2.62, after touching its lowest level since 1991.
"When you talk about nationalization you hear the names Citi and Bank of America as the top two names burning out," said Walter Todd, a portfolio manager at Greenwood Capital Associates.
"We still don't have any clarity about what course of action they (the government) are going to take. In the absence of specifics, people just jump to their own conclusions," he added.
Last month, Bank of America Corp (NYSE:BAC - News) posted its first quarterly loss in 17 years, after mounting losses at recently acquired Merrill Lynch. Citigroup has lost $28.5 billion in the last 15 months, hammered by bad debts and toxic assets.
Each bank received $45 billion in government aid in recent months and a backstop on toxic assets-related losses
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If BAC tanks - I will recant all my previous criticisms of doomsayers and will join them - that would be the WTF of the century.
As I bank with BofA and have previously made humorous jokes at the expense of my GF who banks with Wachovia, now Wells Fargo, I might be in for eating a bit of crow.
It will be interesting to see what Obama does with this. The choice will be between Bank of America and Citigroup on one hand and GM and Chrysler on the other. Recent history says that the banks will receive more money, but there's always the chance they might buck the trend.
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BAC was done from the moment they swallowed Countrywide Financial, there's probably at least $300-500 billion in losses right there. Taking over Merrill just put the final nail in the coffin. As for Shittygroup, they're like putting together IndyMac & AIG, and making it 10 times bigger. I tried to figure out their liabilities once, but ran out of digits on my calculator.
aerius: I'll vote for you if you sleep with me. Lusankya: Deal!
Say, do you want it to be a threesome with your wife? Or a foursome with your wife and sister-in-law? I'm up for either.
Yup, he's learning to spell colour with a "u" now.
aerius: I'll vote for you if you sleep with me. Lusankya: Deal!
Say, do you want it to be a threesome with your wife? Or a foursome with your wife and sister-in-law? I'm up for either.
Chardok wrote:If BAC tanks - I will recant all my previous criticisms of doomsayers and will join them - that would be the WTF of the century.
Hmmm, in that case I better find a few million BAC shares to short and corner the market on BAC put options.
Oh yeah, and start some nasty rumours about them.
But yes, it's probably one of the worst kept secrets around that BAC is insolvent, that its share price is beginning to reflect it should come as no surprise.
CaptainChewbacca wrote:So... what happens to my money?
That's a good question. If Bank of America goes down there's no way the FDIC can cover it unless the FDIC is itself bailed out by the US government. Unlike WaMu or Wachovia, no one can buyout BAC if it goes under since a buyer with that kind of money doesn't exist, it either gets nationalized by the government or shutdown & liquidated by the OTS & FDIC.
If it's nationalized your money should be safe and life goes on as usual. If it's shutdown & liquidated you better hope you have an account with the Bank of Sealy. Your money should be safe (no guarantees though) but it could be frozen for a bit while the various parties sort things out.
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- Margo Timmins
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Too late for B of A to save me, I'm afraid - I've stuck with them long enough. Their rhetoric is hitting a bit too close to home (they sound like WaMu did when we were siezed) Moving accounts to JPM. (besides I get a sweet fucking checking account.) JPM may be monolithic and completely NOT customer-centric, but at least I won't have to fight the FDIC for my money in a few months.
Chardok wrote:Huh...I really thought he was a branch manager for B of A.
Branch Manager for Citizens Bank, aka RBS Citizens, NA. And i'm fine thank you. Citizens is actually the crown jewel in the RBS crown as of late. We make money, but it's hard with the Royal Bag of Shit tied around our neck, sucking us dry. I've heard rumors or a sale to HSBC, Banco Santander and others. but from the same sources that said we were being sold to Citi six months ago...
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How have credit unions been doing in all of this? I only bank with a credit union and they "seem" to be a lot better off than other banks. Business is brisk and they are still making loans. ALthough today a co-worker found out they are making things a bit stricter now. They are only giving loans out for 75% of value instead of the 80% value from before.
As long as the credit union has had the sense to stay away from risky investments, and abides by its charter (most credit union charters prohibit them from lending out more money than they have in deposits) you should be fine.
Also, most credit unions are required to send a financial report to their members. That usually gives you a pretty good idea of the health of said credit union.
A BAC spokesperson just said they were "well-capitalized".
This is generally regarded as the codeword for "we're fucked". As in BSC, WaMu, Wachovia, IndyMac, Freddie & Fannie, Lehmans', and AIG; they all said the same thing, and they're all dead.
aerius: I'll vote for you if you sleep with me. Lusankya: Deal!
Say, do you want it to be a threesome with your wife? Or a foursome with your wife and sister-in-law? I'm up for either.
aerius wrote:A BAC spokesperson just said they were "well-capitalized".
This is generally regarded as the codeword for "we're fucked". As in BSC, WaMu, Wachovia, IndyMac, Freddie & Fannie, Lehmans', and AIG; they all said the same thing, and they're all dead.
I saw that a week ago. it is precisely why my B of A accounts are going bye bye. "Well capitalized" Means " Shit, people are empying their deposit accounts." There is a secret run on B of A, just like there was on WaMu before it was siezed. Most people probably did not hear about it, and maybe they still don't know.
I didn't see the one last week, but since they said "well capitalized" last week and again today, yeah, they're in deep shit and it's pretty much endgame. BAC and Shittygroup shares down another 20% as I'm typing this, at this rate they'll be toast either today or next Friday.
aerius: I'll vote for you if you sleep with me. Lusankya: Deal!
Say, do you want it to be a threesome with your wife? Or a foursome with your wife and sister-in-law? I'm up for either.
So, would now be a good time to empty my various accounts? How were people in other banks affected by collapses? Aren't I safe as long as I have < $100k?
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Kodiak wrote:So, would now be a good time to empty my various accounts? How were people in other banks affected by collapses? Aren't I safe as long as I have < $100k?
Inciting a bank run is a federal offence so I can't advise you to empty your accounts.
But hypothetically speaking, if I were a BAC or C customer I'd be looking at opening a Bank of Sealy account. Right now.
And while in theory you should be safe if you stay under the FDIC limit, consider this: a failure by either Citigroup or Bank of America would bankrupt the FDIC many times over, the FDIC doesn't have nearly enough funds to cover a failure of either bank. Now the FDIC does have a huge line of credit with Treasury so in theory they could tap that line and cover the deposits, and if that still isn't enough they'd have to find more funding through Congress. In practice this means your deposits could be partially or totally frozen out for a while as the FDIC, Treasury, and Congress sorts out who's funding what.
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The slight variations in spelling and grammar enhance its individual character and beauty and in no way are to be considered flaws or defects
I'm not sure why people choose 'To Love is to Bury' as their wedding song...It's about a murder-suicide
- Margo Timmins
When it becomes serious, you have to lie
- Jean-Claude Juncker
I just told someone about the possibility of these two banks being nationalized and they went on about worries of banks being controlled by bureaucrats and America losing its competitive edge due to socialism. I wonder if these people haven't thought about how corporate managers are basically bureaucrats out to get your money as opposed to just being bureaucrats. And competitive edge, well this time really isn't the time for trying to be competitive as opposed to just surviving through the best means you can find.
That aside, nationalizing these banks would mean adding even more to government debt, wouldn't it?
RE: these two banks - yes, in ways you and I can't even begin to fathom. They have their hands in EVERYTHING. it would be an unbelievable, unmitigated disaster. The weird thing is - a lot of these banks DONT KNOW WHERE THEIR MONEY IS because so many of their investments, like mortgage investors have been chopped up into little pieces and sold here, there, and everywhere. This is a scary time, to be sure.
Ah there's been stuff on the news about Obama denying any plans to nationalize the banks. Could the government be forced to do so though when the breaking point comes?
